Patron holds €500m first close ahead of schedule – Exclusive

Patron Capital has raised more than half of its €800 million target for its latest opportunistic real estate fund, Patron Capital VI, after just four months in market, PERE has learned.

The London-based pan-European real estate firm declined to comment, but PERE understands that Patron raised €500 million in an initial close that occurred two to three months ahead of schedule. Alongside the fund, which has a €1 billion hard-cap, the firm is also expected to raise a €200 million sidecar, for which an additional €100 million has already been committed, according to a source familiar with the fund. Patron is expected to reach €700 million in commitments for Fund VI by the late summer or early fall and complete fundraising by year-end or early 2020.

Patron’s limited partner base is understood to be 90 percent from the US by number of investors and 50 percent by amount of capital, with European institutions largely accounting for the remainder. Fund V LPs included the Arizona Public Safety Retirement System, the Finnish Local Government Pensions Institution and Kentucky Retirement Systems, according to PERE data.

For Fund VI, Patron is targeting a vehicle similar in size to its predecessors, the 2016-vintage Fund V and the 2012-vintage Fund VI. Fund V’s capital raise comprised €806 million for the fund and approximately €143 million of co-investment capital while Fund IV, the firm’s largest fund to date, consisted of €780 million for the fund and €320 million of co-investment capital.

Patron’s primary investment strategy, which is focused on Western Europe and comprises 88 percent of invested equity had a gross internal rate of return of 18 percent and 1.61x multiple, according to a company presentation in April. Post-global financial crisis, Patron has generated a 23 percent gross and 1.86x equity multiple, the presentation showed.

The firm is understood to be on track to generate a 25 percent gross IRR for both Fund IV and V. Patron has exited about half of its Fund IV investments, according to its website, and made its first Fund V divestment, the sale of the East Point Business Park in Dublin, in August 2018.

Fund VI will have a similar investment strategy to the prior funds in the opportunistic series. According to the presentation, the firm’s targeted investments include corporate acquisitions and operational real estate assets; institutional non-core and distressed properties; complex situations solved by repositioning assets or platforms; and real estate credit.

Patron currently has a pipeline of investments in the office and residential sectors in Spain and Portugal, in the office sector in Germany, and in distressed property assets in the UK. The pipeline would account for 10-20 percent of Fund IV’s €800 million in equity.

Fund VI is among 25 European opportunistic funds currently in market, according to PERE data. The largest of these is Blackstone’s Blackstone Real Estate Partners Europe VI, which is targeting more than $10 billion. Patron’s Fund V would rank as the fifth-largest on the list.